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Tuesday, October 22, 2013

Anwar: Under Pakatan Budget, no GST or pay hikes for ministers


BY SYED JAYMAL ZAHIIDOCTOBER 21, 2013
UPDATED: OCTOBER 21, 2013 03:14 PM

Anwar said the temporary delay in increasing the ministers’ allowances,
on the other hand, will be part of the pact’s effort to reorganise
federal fiscal management to improve the country’s financials.
— Picture by Choo Choy May

KUALA LUMPUR, Oct 21 — Pakatan Rakyat (PR) will delay rolling out the contentious goods and services tax (GST) and postpone any allowance increase for Cabinet ministers, Datuk Seri Anwar Ibrahim said today when announcing measures in the pact’s alternative Budget meant to slash the deficit and aid the poor.

The Opposition Leader said delaying the implementation of the new tax system is one of the key measures to be introduced under PR’s Budget framework that will focus on equitable, inclusive and sustainable growth for 2014.

The temporary delay in increasing the ministers’ allowances, on the other hand, will be part of the pact’s effort to reorganise federal fiscal management to improve the country’s financials, he said.


The opposition had previously said that subsidy rationalisation, a move that would mostly impact the lower income group, was unnecessary. It instead argued that the budget deficit, now standing at just under 55 per cent of GDP, could easily be managed by “plugging leakages” and ending corruption.

“We do not oppose the GST but the timing of it is wrong,” Anwar told reporters at the preliminary launch of PR’s 2014 Budget held in Parliament here.

The opposition bloc had in the past argued that the implementation of the GST must coincide with the increase in real wage.

The Najib’s administration’s plan to implement the new tax system comes amid soaring inflation and stagnant wages.

“There is growth in inequality and the tax system, which would be implemented in all stages of production and the cost to be transferred to the consumers, will widen the disparity and this is disconcerting,” Anwar commented on the matter.

The GST Bill was tabled for the first reading in 2009 for implementation in late 2011, but was withdrawn during the second reading in 2010 following fierce public resistance.

Three years after the GST idea was set aside, economists and investment banks now predict that the tax will be reintroduced during the tabling of Budget 2014 in Parliament on October 25.

Putrajaya has itself dropped hints in recent months that Prime Minister Datuk Seri Najib Razak, who is also the country’s finance minister, will announce next Friday what economists describe as a long-awaited economic reform.

In a move aimed at widening its revenue base, Putrajaya said the new tax system is expected to collect RM13 billion in the first year of its roll out based on a rate of three per cent, which would amount to a RM1.3 billion increase from the RM11.7 billion figure collected from the existing sales and services tax.

But Anwar and his allies in PR had always argued that existing federal income was enough to drive growth and that Putrajaya’s poor financial standing is caused not by the lack of revenue-generating mechanism like the GST, but due to corruption and wastage in spending.

The PKR de facto leader added that the bloc’s 2014 Budget will see all allocations will be reviewed and restructured. Apart from cutting the allowances for ministers, subsidies will be redistributed only to targeted sectors and spending on unnecessary programmes like the National Service, which costs taxpayers money RM800 million annually, will be reviewed.

In July, Fitch lowered its outlook on Malaysia’s credit citing weaker appetite for reforms following a smaller Barisan Nasional win in Election 2013 and the country’s weak public finances.

The moved triggered Putrajaya to resume the subsidy cuts it suspended in 2010, when it raised pump prices for RON95 petrol and diesel by 20 sen/L in September, although Fitch later insisted on more meaningful reforms such as the GST.

Analysts are expecting further austerity measures to be introduced in the 2014 Budget to be tabled this Friday as Putrajaya aims to reverse the downgrade.

Anwar said despite the global economic turmoil, PR’s people-oriented budget could still push growth to 5.2 per cent in 2014 while reducing the deficit to 3 per cent. Details of its proposals will be unveiled when PR unveil its alternative budget in full this Thursday.

Najib’s government said it aims to cut the deficit to 3.8 per cent for next year.

- See more at: http://www.themalaymailonline.com/malaysia/article/anwar-under-pakatan-budget-no-gst-or-pay-hikes-for-ministers#sthash.w0oup0qn.dpuf

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